Have you outgrown your back-office accounting department? It may be time to invest in new software and additional people or to improve accounting processes to be more efficient and flexible. Are you looking for ways to improve your financial reporting or other unmet needs?

If you have reached this fork in the road, outsourcing parts or all of your financial processes can offer better opportunities in the long-run, allowing your company more time to focus on other parts of the growing business.

Many growing companies are beginning to outsource its financial operations more frequently now that the yearly cost of outsourcing is typically less than the pay of one financial executive. Cutting overhead is crucial to the success of small business and start-up companies.

Is Outsourcing Financial Operations Right For Your Company?

Companies should consider the following five topics when determining on if financial outsourcing is the right answer for their company.

1. People

Handling a full-time staff can oftentimes be challenging especially to small business owners. A company that outsources its financial team eliminates the headache of managing multiple people and in turn receives the benefit of hassle-free timely financial statements to reflect the company’s progress and activity each month, quarter, or year. The company also eliminates the need to manage vacation time, sick leave, or any other workplace disruption. With an outsourced financial team will eliminate such potential issues by having other staff on the team work to meet client deadlines, so the client does not experience any delays with expected deliverables produced by the financial team.

2. Quality

Quality, some say is the most important piece to consider when finding an outsourced financial team. Quality of team members and quality of work are both equally as critical to clients considering outsourcing its financial department. Current and previous client testimonials as well as the reputation of the firm can help potential clients determine the overall quality of the team. It is important to remember that most outsourced financial teams will produce top-level deliverables because the reputation of the team depends on the team’s success which is determined by the client retention rate and client testimonials.

3. Technology

Keeping a competitive advantage in the marketplace is what drives outsourced financial teams to use the latest technology available that allows for the most efficiencies. Finding a cloud-based financial team is crucial to a client’s mobility and success. With cloud-based software programs the client will be able to access financials, general ledger reports, AP and AR aging, outstanding bills, and other items relating to its financial status all within a web-browser or mobile app depending on the software being utilized. This type of mobility also allows executives to have the most real-time financials as possible instead of having to wait one to two weeks for the month to be finalized and books to officially be “closed.”

4. Security

Protecting confidential documents and ensuring the proper internal controls are in place can be challenging and costly to a company. With an outsourced financial team, the client automatically receives the protection from the outsourced team’s internal IT department at no extra charge to the client. The client also is able to use the secure file sharing software licensed by the internal IT department, so that the company can file share outside of the secure server. For example, via email with an outside party.

5. Pricing

With an outsourced financial team the pricing of the monthly fees are typically always scalable to the amount of work expected to be completed each month. Most monthly fees are a flat fee which enables the client to properly budget for the year with the comfort of no “surprise” charges accumulating throughout each month. The total yearly fees often are equal or less than the pay of one full-time employee that the client would have to employ if the client chose to have internal operations instead of outsourced operations; which is typically not a scalable option for start-up or small businesses due to the high amount of overhead needed to support an internal department.

Learn more about our Outsourced Financial Management Services.

What is outsourced accounting?

Essentially it’s back-office support without the fixed costs of maintaining a full-service in-house accounting staff. It can offer a continual fresh eye on your business, larger-scale technology and access to seasoned accounting teams without incurring the expense of hiring and training.

Outsourcing can be as minimal or extensive as you need. Some companies need only the basic services: accounts payable, accounts receivable, reconciliation, payroll and cash flow management. Others need more developed services, including budgeting, custom reports, dashboards and others. A full-service outsourced arrangement might include CFO services, tax consulting, IT consulting and strategic planning.

One advantage of outsourcing is that it can be customized to your needs, and adaptable enough to grow with your business.

For example, two entrepreneurs who did not want to incur the time and stress of hiring an internal accounting person for their new company decided instead to partner with an outside firm for financial services. The results? The company got a cloud-based accounting system, along with a cloud-­based vendor payment system that integrated with the general ledger. It gave both owners the convenience of working remotely and traveling on short notice to meet with clients while enjoying the peace of mind that an experienced team knew how to process and record accounting transactions and resolve issues as they arose.

Another organization that had enjoyed significant growth for several years found itself with separate general ledgers and different software systems for its various entities. The management reporting process was manual and required too much time each month.

The company’s decision to outsource led to a newly designed accounting infrastructure that streamlined the reporting process of various entities within one system. The cash-disbursement process was converted from a large volume of manually signed checks to an online vendor payment system, significantly reducing costs and paperwork.

This combination of changes enhanced the organization’s confidence in its financials, saved a great deal of time and allowed management to get the reports they needed sooner so that they could stay focused on the organization’s mission.

Think of it this way. Instead of immediately hiring more people and increasing your own overhead, partnering with a financial firm to provide ongoing or special project services gives you the benefit of someone else’s investment in software and skilled accountants.

A long-time leading company in the music industry, for example, found its existing staff stretched thin when it implemented a new general ledger accounting system as a result of a large acquisition. The new software and a significantly higher volume of transactions strained the company’s finance department.

Instead of hiring more people, the CFO worked with an outside partner to find ways to move things forward quickly. Their experience with the accounting system saved his team valuable time and reduced their frustrations. New cloud-based software allows for efficient processing of accounting transactions daily without having to be on-site.

In another case, a venture-capital backed company had developed a software platform to generate revenue. This virtual company had no corporate office, and the management team was located in several cities. By using a cloud-based accounting solution for its general ledger, management reporting and vendor payment process, the company was able to eliminate geographical barriers so it could recruit the best talent for its organization regardless of location.

In another example, a private equity firm had experienced significant growth in its real estate investment trust business. They wanted to work with a team who would understand the technical nature of the service line and who had the infrastructure to scale up with the company’s growth. Their solution included a cloud-based system accessible to the company’s management team from a smartphone, tablet, laptop or desktop computer, and access to professionals who could answer questions, research transactions and add entities as needed.

No matter the size — whether it’s a small and growing entrepreneurial venture or an established business facing changes or significant growth — companies are finding they have options in developing an accounting structure that works for them.

Content provided by LBMC professional Tammy Wolcott.